Interviewee | Faust, Co-founder of Geek Web3 & BTCEden

Editor | defioasis

Disclaimer: This article does not provide any financial advice. Readers are strictly required to comply with local laws and regulations. The views of the interviewee do not represent those of Wu Shuo and the interviewer. Readers are advised to distinguish clearly.

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On April 20th, Bitcoin completed its fourth halving, and Runes went live. Upon its launch, the minting and initial offering activities of Runes caused high congestion on the Bitcoin network, with network transaction fees exceeding 2,000 sat/vb at one point. According to glassnode data, on April 20th, Bitcoin miners' income reached $107 million, with 75.444% coming from network transaction fees, setting a new historical high. On the eve of the halving, Bitcoin Layer2 Merlin Chain with the highest TVL also released tokens and went live on OKX exchange.

This is an interview with Faust, co-founder of BTCEden, a Bitcoin L2 rating website. The interview lasts approximately 45 minutes and covers topics such as Runes, Ordinals, Atomicals, Bitcoin's primary asset issuance protocols, and the technical architecture and viewpoints of Bitcoin Layer2 such as Merlin. The interview took place at 8:00 PM Beijing time on April 20th.

Briefly introduce yourself

Faust: Hello everyone, I am Faust, co-founder of Geek Web3 and BTCEden. Geek Web3 is currently conducting technical research and media platforming similar to Messari, and we also have our own technical community. BTCEden aims to become a technical assessment and risk visualization website for the Bitcoin ecosystem, similar to L2Beat in the Ethereum community.

My personal experience is quite interesting and somewhat convoluted. Compared to most Web3 entrepreneurs, I am relatively young - I have been working for less than four years. Initially, I did not have a background in computer science (CS), but I had a strong interest in computer technology and aspired to become a top-notch programmer. However, during the 2020 pandemic, I started writing in my spare time and quickly realized that writing was the greatest joy in my life, leading to a shift in my career planning.

I have worked at OKX, BlockBeats, and Bobcat Miners. During this time, I realized that the Chinese Web3 lacked a platform with significant influence focused on technical popularization and education. Although there are many professional media and Web3 education communities in this circle, platforms with significant influence and a focus on technology and underlying principles are few.

After leaving my last company in May 2023, I made the decision to embark on the entrepreneurial journey, which was the earliest origin of Geek Web3.

At that time, I was more focused on Ethereum Layer2, and I was amazed by the L2Beat website while studying Ethereum Layer2 knowledge. In this all-in-one Ethereum Layer2 information repository, whether it's the technical solutions of major Rollups or security risk visualization, everything is presented in a very detailed, systematic, and clear manner.

L2Beat made me realize that Web3 rating agencies could be successful. Between 2023 and 2024, with the Bitcoin ecosystem thriving and various projects emerging, the Bitcoin ecosystem greatly needed something similar to L2Beat.

In March of this year, I collaborated with a well-known industry expert to officially launch BTCEden, a Bitcoin ecosystem L2Beat, modeled after L2Beat in the Ethereum community. This website focuses specifically on the technical rating, security risk assessment, and risk visualization of Bitcoin Layer2, and will also display key data such as TVL, TPS, and fees, as well as various comprehensive evaluation indicators.

What is your view on the emergence of Runes, a new asset issuance protocol, and how does it differ from the existing Ordinals and Atomicals?

Faust: From a technical perspective, BRC-20 assets such as Ordinals, Runes, and Atomicals are different from each other. In terms of the existence and transfer of assets on the Bitcoin chain, Runes and RGB are more similar in terms of the parasitic and transfer forms of assets, while Atomicals are more like colored coins, and Ordinals are more unique.

Ordinals and Runes, RGB, all send off-chain generated transaction data to the Bitcoin chain, with the former using taproot and the latter two using the op_return opcode. Anyone running a client with an indexer can retrieve and parse this data, and know what Ordinals or Runes-related transactions have occurred recently.

Atomicals, on the other hand, are different from Ordinals, Runes, and RGB. Atomicals assets have a binding relationship with Bitcoin UTXO, which makes it fundamentally different from the other asset protocols.

For example, if a user wants to trigger an Atomicals transaction, they only need to transfer the colored Bitcoin UTXO directly to someone else. The client can identify who the Atomicals assets were transferred to and the amount transferred by monitoring the transfer of Bitcoin UTXO. However, the working principles of Ordinals and Runes are different from Atomicals. Compared to Atomicals, Ordinals and Runes may have a greater reliance on indexers.

We can consider that Runes, Ordinals, and Atomicals each have their own characteristics, and Runes itself is an upgraded version of the Ordinals protocol, superior to Ordinals. Atomicals have more diversity in their gameplay and more potential use cases compared to Ordinals and Runes.

Will Runes potentially replace the more common Ordinals and BRC-20 as the final Bitcoin asset issuance protocol? What do you think the future landscape of asset protocols on the Bitcoin layer will look like?

Faust: Some people believe that after the rise of Runes and Atomicals, Ordinals may lose its popularity because Runes is essentially an evolved version of Ordinals.

Since the rise of Runes and RGB++, there hasn't been much noise about Ordinals after the BRC-20, and now most people are mainly focused on Runes and RGB++. In the future, the popularity and momentum of Ordinals may be overshadowed by Runes. From a technical perspective, market enthusiasm, and narrative, I believe Ordinals does not have any advantage over Runes. Runes, Atomicals, and RGB++ are likely to be the inevitable trend for future Bitcoin derivative asset protocols.

Could Runes potentially take on other narrative capabilities, such as in gaming?

Faust: Yes, Runes could potentially take on other narrative capabilities, such as in gaming.

Faust: I think it's entirely possible. When it comes to related games or similar activities, the connection to technology might not be particularly significant; it's more about ecosystem development. For things like Runes, all that's needed is to establish the circulation of assets, design asset issuance protocols, and handle the business logic related to assets.

Given the current popularity of Runes, it's entirely possible that we'll see the emergence of blockchain games or other phenomenon-level applications. Vitalik has explained the "low-hanging fruit" theory, which suggests that if something becomes a trend and garners enough attention, there will inevitably be people exploring peripheral matters related to it. Developing a game related to the Runes protocol is definitely something that will be pursued, but it's uncertain which project will be successful.

Bitcoin Magazine defines Bitcoin L2 standards as using BTC as the native asset, using Bitcoin as the settlement mechanism for executing transactions, and the need to demonstrate dependency on Bitcoin's functionality. What is your view on Bitcoin Magazine's definition of these Bitcoin L2 standards? Does BTCEden have its own defined standards?

Faust: The standards set by Bitcoin Magazine are quite interesting but carry a strong ideological color. As we can see, their definition of using BTC as the native asset, utilizing Bitcoin as the settlement mechanism for executing transactions, and demonstrating dependency on Bitcoin's functionality are actually characteristics displayed between Ethereum and Ethereum Layer2.

It seems that Bitcoin Magazine has summarized the coupling relationship between Ethereum Layer2 and Ethereum and stated that this relationship should also be met by Bitcoin Layer2, considering it a necessary condition for Layer2.

Personally, I think it's redundant to say that there is functional dependency between Layer2 and Bitcoin. Anything even remotely related to Bitcoin Layer2 has functional dependency on Bitcoin.

The use of Bitcoin as a transaction settlement mechanism is particularly important. What does settlement mechanism mean? Firstly, this Layer2 should be able to inherit the security of Bitcoin, just like Ethereum Layer2 inherits security from Ethereum.

Using Bitcoin as a settlement platform ensures that the security of this transaction ultimately relies on Bitcoin. This logic is quite similar to Ethereum Layer2. The Ethereum Foundation has clearly defined which technical solutions and product types belong to Layer2 from a security perspective. For example, they believe that, from a security standpoint, state channels, Plasma, and rollups are all Layer2, and these three technical solutions theoretically ensure the perpetual security of user assets.

Of course, this is from a theoretical perspective, and in practice, most Ethereum Layer2 projects have various risks. I think it's not wrong for Bitcoin Magazine to present this as a necessary condition for Bitcoin Layer2, and at least I personally don't oppose this approach, although I don't fully support it either.

What BTCEden is currently doing is evaluating various Bitcoin Layer2 projects from a security risk perspective. I place a strong emphasis on security. Many Bitcoin Layer2 project teams are not very responsible when it comes to asset security; they are very casual about it, and some don't even have a reliable technical document or a decent whitepaper.

Bitcoin Magazine may be trying to address the chaos in the Bitcoin ecosystem through their so-called "three rules." I don't oppose the three standards they have proposed. However, I believe that if we want to rigorously define what Bitcoin Layer2 is and what it is not, the simple three definitions from Bitcoin Magazine are definitely not enough.

To propose a truly meaningful framework for Bitcoin Layer2 standards would be much more complex than what Bitcoin Magazine has suggested.

Of course, this may be beyond our capabilities, so BTCEden's current approach is to not consider what Bitcoin Layer2 is or isn't. If a project claims to be a Bitcoin Layer2 and has even the slightest functional dependency on Bitcoin, we will publish the project's information and security risk assessment on our BTCEden website.

We currently have a very open attitude. But going back to the initial question of what Bitcoin Layer2 is and how to define it, this is something that the market and the community will likely determine. I think it will take at least another year for most people to reach a consensus. It's too early to discuss this issue now.

What is the technical architecture of Merlin Chain?

Faust: The technical architecture of Merlin Chain is quite clear. I believe that Merlin is quite similar to certain Ethereum Layer2 solutions. They explicitly emphasize on their official website that they have a "decentralized oracle." In a sense, this decentralized oracle is a new name for what is known as the Data Availability Committee (DAC). What is a Data Availability Committee? Many Layer2 solutions do not send all their complete data to Ethereum or Bitcoin chains, as the cost would be too high. Instead, they publish the data to a Layer1 off-chain, creating a so-called DA layer.

The Data Availability Committee is one way to implement the off-chain DA layer. The DAC committee acts as a guarantor, checking whether the Layer2 sequencer has published complete DA data off-chain. If they detect that the sequencer has indeed published the data off-chain, the DAC members will generate a multi-signature and upload it to the Ethereum or Bitcoin chain. This essentially informs the outside world that we have checked the sequencer, and it has indeed published the data to the Ethereum or Bitcoin chain.

However, many Ethereum Layer2 DAC nodes operate in a KYC manner and must be officially appointed to join the Data Availability Committee. This approach is essentially no different from the official establishment of a few nodes; it is a completely centralized form.

Many Ethereum Layer2 DAC nodes are limited in number, and their multi-signatures are often 3/5, 2/5, or 2/4, which is very unreliable.

Even more problematic is that many Layer2 DACs have monopolistic power. What does this monopoly mean? The sequencer only sends DA data to these DAC nodes, and others cannot see this data at all. If anyone wants to access the latest data published by the sequencer, they must first apply to the Data Availability Committee nodes.

If the committee nodes refuse to provide DA data, then you won't get anything. This is a blatant regression to the alliance chain model. The Ethereum Foundation's Dankrad is deeply resentful of this; in August of last year, he criticized many project DACs on Twitter for having issues.

However, Merlin, while also using a DAC, has a decentralized DAC, meaning that the access permission for this Data Availability Committee is open. Anyone can become a member of the DAC by staking assets. By staking a certain amount of assets in a PoS manner, one can join the DAC, making it highly decentralized.

This is the biggest difference between Merlin's Data Availability Committee and some Ethereum Layer2 Data Availability Committees. In this form, it's like I've created a chain under the Bitcoin chain, specifically for receiving DA data published by the sequencer. Anyone who wants to access the data can request data reading permissions from the chain created by Merlin, or run a node to join Merlin Chain's Data Availability Committee group.

This approach is more decentralized. B^Square is currently using a similar approach in a way, but they don't call it a DAC; it's more like Celestia.

In summary, we can understand that Merlin's overall structure is quite similar to some Ethereum Layer2 solutions. There's no need for me to go into further detail, as it's already well-known.

The architecture of projects like Merlin and B^Square is quite similar to some Ethereum Layer2 solutions. Why don't they support each other with LST/LRT on Ethereum? What's the reason for this?

Faust: I think this involves the fact that they belong to different systems, different infrastructures, or, to put it simply, they operate within different ecosystems. This particularly depends on the full-chain interaction of various assets. The infrastructure for full-chain interoperability between Bitcoin and Ethereum is still very incomplete. For example, to support multiple chains like Merlin and B^Square with Ethereum Layer2 or Avalanche, there is a necessary condition: the full-chain interoperability scenario needs to be more mature. However, as we can see, the Bitcoin ecosystem is just getting started, and its related infrastructure is still very incomplete. This may be a very important reason.

What problems does RGB++ solve, and what is its relationship with the original RGB?

Faust: RGB++ is actually an improved version of the original RGB protocol implemented by the CKB official team, compatible with CKB. First, let me explain what RGB is. Although RGB is also a Web3 infrastructure, it's actually a network without consensus, a purely P2P system.

You can think of it as the early days of the internet, where different hosts and computers communicated in a P2P manner. RGB doesn't have a consensus protocol; each participant operates independently in a loose P2P network.

If you want to ensure reliable asset exchange between any two parties, it's similar to the most primitive form of asset exchange among humans. As the recipient of assets, you need to verify the issuer's asset status and the legitimacy of the asset's history provided to you.

In a way, RGB is similar to this scenario. When you don't have access to other people's asset data, asset status, and origins, you need to meticulously trace the asset's original issuance, circulation, and the number of times it has changed hands. By the time it's presented to you, you need to verify if the asset is valid and if the asset balance is indeed as claimed. If someone says they have 5,000 BTC, they could have fabricated this claim, and you need to ensure that this doesn't happen, which is what RGB does.

RGB++ is an improvement of the original RGB protocol by CKB. As I mentioned earlier, RGB is a P2P system without consensus. If someone wants to transfer money to you, you need to verify it yourself, which is quite cumbersome. If the money has changed hands millions of times, it would be very slow to verify each transaction. RGB also has many other issues; it doesn't support DeFi and complex smart contracts very well. This is ultimately due to the lack of consensus. Consensus ensures that the same data is received by many members of the network. Without consensus, as a smart contract issuer in RGB, you cannot require other RGB users to locally back up the entire smart contract data.

So, RGB officially did something quite absurd. They allowed smart contract issuers to find any platform, such as Twitter, Github, or any forum, to inform everyone about the design and functionality of a smart contract and let everyone download and back it up themselves. If someone wants to use a feature of the smart contract later, they need to find someone who also recognizes the smart contract and has downloaded it locally to interact further.

This approach is clearly impractical. It's not conducive to the widespread adoption of smart contracts, especially for DeFi smart contracts, which are similar to public goods. Without a consensus protocol, how can you maintain the operation of public goods? In Ethereum, for example, all account data is aggregated and replicated to all Ethereum nodes. Through consensus, many complex smart contracts can be backed up across the entire network. However, in RGB, public goods-like unowned contracts are at risk of becoming private property because of the lack of consensus. If only a few nodes have control over public goods or only a few can synchronize changes to public goods in a timely manner, then it's no longer a public good but more like a private one.

If RGB wants to implement DeFi, it will be troublesome and may not have the appearance of a decentralized infrastructure. This means that RGB is not conducive to the DeFi scene. It hasn't actually attracted many real users so far, and while the narrative may seem interesting, from a product perspective, it faces many problems.

RGB++ publishes the asset data and asset change records of RGB to the CKB chain. This way, every time an RGB asset is transferred or undergoes a data change, the CKB network automatically backs it up and ensures that all nodes are synchronized, similar to the approach in most public chains.

RGB++ and RGB share a common feature. RGB is like issuing an asset similar to Runes, and then the newly issued asset seeks security from Bitcoin by binding it to a UTXO on the Bitcoin chain, establishing a one-to-one mapping. If the Bitcoin UTXO is not spent, then the RGB bound to that UTXO will not be spent either, preventing double spending and partially inheriting Bitcoin's security.

RGB++ also has this property. It binds an RGB asset container on CKB to a UTXO on the Bitcoin chain. If the Bitcoin UTXO remains intact, then the assets in the bound CKB asset container will also remain secure, partially inheriting Bitcoin's security.

This is the general relationship between the two. RGB++ has made significant improvements in the usability of the product and support for contracts compared to RGB. However, the ecosystem development of RGB may be very slow.

In your opinion, which one, Bitcoin Core or the Ethereum Foundation, will have a greater impact on their respective ecosystems?

Faust: This is an interesting question. Let me start with the Ethereum Foundation. I think the current Ethereum ecosystem has been shaped to a certain extent by the Ethereum Foundation, somewhat like the relationship between Constantine and the Catholic Church. Some have even said that the Ethereum Foundation is more like a church, similar to the Catholic Church. The entire Ethereum ecosystem has been largely shaped by the Ethereum Foundation, especially by Vitalik and his team.

Many things in this ecosystem largely align with the ideas of Vitalik and the Ethereum Foundation. However, projects like Restaking and EigenLayer have actually exceeded the expectations of the Ethereum Foundation.

Regarding the question of how much the Ethereum Foundation has helped its own ecosystem, I don't think we can use the word "help," but rather "influence." The current state of the Ethereum ecosystem has been largely shaped by the Ethereum Foundation. In this process, many things have been excluded, while many others have been nurtured. It's difficult to say whether this has been more helpful or harmful to the ecosystem.

However, the current size of the Ethereum ecosystem is closely related to the Ethereum Foundation. I believe they have had a significant impact on their own ecosystem.

In contrast, the attitude of Bitcoin Core towards the Bitcoin ecosystem is more laissez-faire, and its influence on the Bitcoin ecosystem is much smaller. It doesn't intervene in the affairs of its ecosystem as frequently as the Ethereum Foundation does. It mainly provides a technical platform and is responsible for improving the Bitcoin client's code to help the Bitcoin network operate better. However, the influence of the Bitcoin Core team on what happens on the network is much smaller than that of the Ethereum Foundation. One advantage of this approach is that it's more free.

It's important to understand that in many cases, greater freedom leads to more innovation. Although the Ethereum ecosystem has also seen a lot of innovation, many people would probably agree that the current Bitcoin ecosystem is much freer than the Ethereum ecosystem.

In a free and open world, the help for ecosystem development is definitely greater. In a way, I believe that many people prefer the model and operational method of the Bitcoin Core. This is also why many people believe that the opportunities, vitality, and prosperity of the current Bitcoin ecosystem may be better than those of the current Ethereum ecosystem. Personally, I also prefer the governance model of Bitcoin Core and the operational mode of the Bitcoin ecosystem, rather than that of the Ethereum Foundation.

Projects in the Bitcoin Ecosystem or Bitcoin Layer2 that I am optimistic about and willing to invest in, and the reasons

Faust: I'll mention a few that I am quite optimistic about. BitLayer, Merlin, and B^Square are all quite good Bitcoin Layer2 projects. Citrea is also very promising.

I believe that in the future, only a few projects in the Bitcoin ecosystem will truly succeed. This is somewhat similar to Ethereum Layer2, where only a few projects with a large scale and many real use cases will likely emerge, probably only 5-6 or less than 10. The rest may not succeed at all.

Why am I optimistic about these Bitcoin Layer2 projects? First of all, Merlin already has its own ecosystem. Whether it's based on the wealth effect or some kind of narrative, at least it has a real ecosystem with real users. Unlike many projects that have complex and impressive technology but end up without any users.

Merlin has already shown through practical action that it has achieved something. Then, they can gradually address many technical challenges. This is why I am optimistic about them: they are the first truly successful Bitcoin Layer2 project.

B^Square also performs well in terms of data, which is one of the reasons I am optimistic about them. BitLayer and Citrea are projects that I am more familiar with. From the perspective of technical implementation, team members' backgrounds, the backgrounds of their investors, their technical solutions, and the completeness of their whitepapers, both Citrea and BitLayer are among the most technically advanced teams. At least in terms of the completeness of their technical roadmaps, their seriousness about Bitcoin Layer2, and their emphasis on security, they can rank in the top ten or even the top five.

This is why I am more optimistic about them. Their attitude is quite serious, and they genuinely want to achieve something, rather than simply riding a wave of hype like many Bitcoin Layer2 projects.

I believe that if a project cannot even produce a decent technical document or a whitepaper, and if they don't have a thorough understanding of their security and technical solutions, then their attitude is very perfunctory.

We see many such projects in the Bitcoin ecosystem, and some of them are star projects that have raised a lot of money, yet they don't even have a technical document or a whitepaper on their official website.

I personally believe that the attitude of the founder is very important for whether a project can succeed. If a founder lacks vision, then the project itself will not have much potential.

Bonus

Faust: Currently, my personal investments are mainly in some major cryptocurrencies on secondary markets, or in some blue-chip assets on Binance and OKX. My holdings include: CKB, Merlin, OP, Worldcoin, STX, SUI, TIA, Arbitrum, Starknet, and BTC.

These are all long-term holdings for me. I rarely interact with the blockchain now, and my main focus is on daily work. I have a characteristic in my approach to investments: if I'm not prepared, I simply won't do it. I won't invest in something I don't understand.

As for on-chain assets in the Bitcoin ecosystem, I haven't made any preparations in this area, and I don't have the time and energy to gather information. I haven't touched any Runes so far, and I only used 2000U to forge Inscriptions last December, which is basically negligible.

Advice for newcomers

Faust: I would advise young people and those who have just entered this industry to spend less time trying to get rich quick through speculation and more time learning various Web3 knowledge. It's especially important to deepen your understanding of technology, finance, various products, including DeFi, asset protocols, or other financial products, and the underlying technology of blockchain.

Many people who enter this circle spend all their time speculating on things like meme coins and don't focus on learning or personal growth. They just want to get rich quick through luck, and this mindset is very unhealthy and distorted. Don't do that. Most likely, you won't make much money, and you won't grow at all. The most reliable and meaningful thing to do is to spend time learning various knowledge and improving your skill set to make yourself stronger.

In fact, Web3 is a very suitable circle for entrepreneurs. There is no other circle like Web3 with so many entrepreneurial projects, and many of them can be successful. The difficulty and barriers to entry for entrepreneurship in Web3 are much lower than in traditional industries, and most people can live quite decently.

I would advise those who are new to this circle to spend more time learning, then find a decent job, hone their skills for a while, and then seize a good opportunity to start a business. It's important to have a long-term vision and constantly motivate yourself to achieve your goals, otherwise life will be very boring, and that kind of boredom and fatigue cannot be solved by having money.

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